Global Economy is bound to swing back with Costs & Losses

Humans have always believed in their collective strength and built networks of fulfillments around them, which are connected and interdependent; in the present times the master network is collectively referred to as Economy.

The word COVID-19 is not at all unknown to the world due to its impact on human race. There is hardly any country remaining who is untouched completely from the negative effects of COVID-19 outbreak. The world is asking two basic questions:

1. When will the world get a vaccine for this deadly virus?

2. What will be the economic after effect of COVID-19 especially post lockdown situation due to this pandemic?

Well answering the first question is comparably easier than the second one.

Countries like U.S. China, India, Britain, Israel, Germany, Italy etc. are working round the clock to develop the COVID-19 vaccine. Whereas some countries are in their advanced clinical stage to develop the vaccine & hopefully we will get a positive outcome of this, at the end it doesn’t really matter which country does it first.

Now coming to the next question, it is quite uncomfortable to answer for the world leaders & involves a lot of complexities. More than half of the world is under lockdown to avoid the community transmission of this deadly virus & the countries under lockdown are looking for an exit plan. During & after effects of this lockdown the economic crisis which has erupted or will erupt in these countries has become a nightmare for even the strongest economies like U.S. China, Japan, Germany and India to fight with.

Many countries are expecting a major recession as an outcome of COVID-19 & if the economists and the experts are to be believed than the world economy may face a depression period equivalent to the Great Depression of US in the 1920’s, which is a very horrible thing to even imagine let alone tackle.

The world economy has been deeply shaken by the Novel Corona Virus outbreak. Starting from manufacturing units, service industry, hospitality industry, mining, oil & gas, import/export & overall trade has affected severely. The global supply chain has been damaged by the slowdown of production & consumption. According to global trade forecast, there can be an up to 32% fall in global trade volume.

Strict traffic restrictions are leading to an increase in the costs of the trade by 25% which means many factories will not be able to make profits due to this. Many sectors like manufacturing companies will be bound to increase the price of the goods, which means the retailers will have to increase the good’s price as well resulting in an economic inflation.

According to the report of International Labor Organization, 2.7 billion people or 81% of the global workforce is currently affected by full or partial workforce closure. An estimate made by the same organization says that workers are likely to lose $3.4 trillion plus. The world is already under the anguish of limited employment opportunities it will further see a sharp decrease of employment which will cause serious problems like hunger, unavailability of basic amenities & poverty. The world has already started witnessing such situations in country like Lebanon in terms of public unrest due to hunger. Job security is the burning question for the Chinese people & it became a great headache for the Chinese government even. World’s topmost economies such as U.S. China, U.K. Germany, Japan etc are facing great economic challenges when we look at macroeconomic indicators. Even the U.S. economy records more than 3 million unemployed. China the biggest trade rival of U.S. is also hit hard by the affects of COVID-19 outbreak. Though China is re-opening its manufacturing units after a long lockdown, but its major partner countries in terms of import & export are still under lockdown. Europe, U.S. or China are not able to import their necessary goods nor are they able to export their components, creating a huge imbalance of supply & demand as China has a touch point into every other economy in the world as they are part of the global supply chain.

Even the oil rich middle-eastern countries are feeling the heat of this world crisis as usage of oil has reached its all time low. These countries are completely dependent upon oil economy; Saudi Arab can be an example where 87% of the revenue comes from the oil economy. Poor African countries are in the worst situation when the current growth rate has fallen to negative 5.1% & millions of households are likely to push towards further poverty & food security risk is in its all-time high.

When the whole world is going through such a situation, imagine the situation of a country having a population of 1.3 billion making it the second largest populous country in the world & a living place for 17.7% of the total people in the world? Yes, we are talking about India.

Like other COVID-19 affected countries, India is also going through a prolonged lockdown, which it has never seen before & its booming economy has been a hard hit due to COVID-19 outbreak. Be it manufacturing sector, service industry, aviation/railway/transport, hospitality & entertainment industry has been derailed. Ships with full containers are stuck in the ports, import/export, SME’s, startups all are the victims of the after effects of COVID-19 pandemic.

But making the current situation a learning phase, Indian companies especially the Indian MNC’s are targeting to capture 40% of their competitors market share by looking at indigenous production of goods. The same determination has been reflected to in the speech of the Indian PM Narendra Modi’s address to the Nation where he firmly communicated his fellow Indians that, it is the right time for India to come out from any dependency of other countries & make India self-sufficient.

In the meanwhile whilst all these important episodes are going on in India & the rest of the world in a fast pace, a small section of the Indian and international main-stream media, left-liberal intellectuals, few opposition political parties of India have started bashing the Government of India, its current policies and its plan of actions to counter the COVID-19 outcome.

By making unrealistic assumptions, writing illogical articles, through hot debates with poor and no facts & figures & most importantly having no better alternatives or suggestions for the government of India & trying to project a scary & imaginary situation to create a false hue & cry situation as a failed attempt to create a negative public opinion against the government by igniting false propaganda. When ideally people from all sections are expected to come together to fight in such an hour of crisis especially the elite class, it is unfortunate that a micro section of people are wasting their time/energy/resources for their short time gains & are not ready to see the bigger picture.

But when we see the world reports about India like IMF where it states that India is likely to continue its growth rate of 1.8-2.8% in 2020 which is the highest among the G-20 nations, it makes the real scenario crystal clear.Various global ratings forecasting GDP growth rate for 2020-21 for U.S. is 1.3%, China 2.9% & surprisingly India is at 3.5%.

India’s management for COVID-19 outbreak was noticed globally & appreciated by world forums like IMF, W.H.O, U.N & advanced economies like U.S. U.K. Germany, Italy, Japan etc. So, what has India done right which made it stand alone on world stage where even the world’s strongest economies are struggling hard to sustain?

Unlike China, India is not dependent on exports & imports contribute merely 10% of its GDP.

India had already started producing essential goods in its home soil under the flagship of Make in India.

India being a population of 1.3 billion is huge market for itself & others as well.

India is an agricultural industry by large and it still follows the traditional methods of cultivation causing minimum dependency on any third party.

PM Modi’s Make in India initiative had already lured global investors to invest in India & India is rapidly rising in the index of ease of doing business in the world.

India having the largest pharmaceutical hub in the world, which is likely to be the largest producer of medicine in post COVID1-19 situation in near future.

Due to COVID-19 outbreak & the suspicious role of China’s Communist regime, most of the world’s investors & companies are not anymore interested doing business with China & finds India as the preferable place to shift their manufacturing units. Country like Japan has already started the process where they are encouraging Japanese companies to completely come out of China & are giving a huge bailout package for the same. Japanese companies are eagerly waiting for the green signal from Indian Govt to kick start their business in India.

Other major business partners of China like U.S. & Europe which are dependent a lot on China for their imports also desperately want India to replace China.

It’s a hard truth that COVID-19 has changed the world. Manufacturing units either in India or rest of the world or any other industry will be back on the track sooner or later. Though COVID-19 active cases are huge with a small mortality rate but it’s a mater of fact that the amount is not that huge which can reduce the demand of goods/services drastically. We are seeing a case of latent demand or dormant demand as people are in lockdown some sectors are bind to take a hit and some to boom for example Pharma, chemicals, ITES, Telecom. The numbers coming out at this point in time are not real indicators as world is in lockdown and so to say global economy has met an accident and is hospitalized but recovering . Numbers coming out are bound to be gloomy as due to above mentioned reasons and comparing them with three months old numbers would be naïve as the numbers after three months from now ill be much better than what we see today. Agreed we all are going through a bad patch but the good news is that it is not permanent as demand of the goods or services decline drastically if and only if there is a huge population loss, but the current scenario that is not the case when we look at global mortality ratio to global population. This is sad and unfortunate to have any one die but like an accident some unfortunate people die while most get saved but life has to move on, simply because things are beyond our control at times .Yes, sadly a micro minority in India & in the world will not be able to survive the high tide caused by COVID-19 & its after affects but the vast majority’s life will back to normal with each passing day. Dooms day numbers are of no help as they are bound to look bad which is no brainer and they are only bound to get better by every passing day,

Weeks and months. These all analysis and numbers would have been a big concern and alarm if there was no COVID and no such disease or anything at all. Yes there is a lesson we all need to learn, humans are tough and strong but fragile. It is truth the strength of glass is more than steel and it is equally true that glass is fragile also.

Rentomojo

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